Tax Code Reforms Unlikely to Happen During Election Year, However
Tax reforms are back in the spotlight this election year as the Obama Administration recently announced rules aimed at preventing corporate inversions. According to a Wall Street Journal analysis, the issue of America’s broken US corporate tax code is gaining bipartisan attention. Currently the US has a 35% corporate tax rate, which is the highest in the world, the Journal notes, arguing that this has encouraged US companies to leave profits in accounts in countries with lower tax rates. The Journal says the Obama administration and congressional Republicans agree on reducing the tax rate, making it harder for companies to shift profits abroad and cutting incentives for companies to stockpile profits overseas. However, aside from agreeing that the rate should be lower, the Journal says the two sides agree on little else. President Obama is said to favor an approach focusing just on business taxes, and proposes making US companies pay a one-time tax of 14% on their offshore profits along with a minimum tax of 19% on any future foreign profits. Meanwhile, the corporate rate for US income would fall to 28%. For their part, Republicans have other ideas about addressing corporate tax reforms. For instance, many hope to address reforms to both business and individual taxes at the same time, and they are more likely to favor a general net cut in the tax rate. In one example, House Ways and Means Committee Chair Rep. Kevin Brady (R-TX) has called for a corporate tax rate under 20%.
What Happens Next
The Journal suggests that since 2016 is an election year, major Congressional legislation is unlikely to happen until 2017.
What This Means For Small Businesses
Small business owners suffer when an already complicated tax code becomes even more so. While talk of bipartisan support for reforming the tax code is somewhat encouraging, America’s job creators need action, not just empty promises. As Bloomberg View argues in an editorial, part of a “sensible tax system” would be one that makes the tax code simpler. However, measures by the current Administration are likely to “make the code even more complicated when it desperately needs to be simpler” and “shouldn’t be confused with reform.”
NFIB previously discussed its support of reforms that simplify the tax code and aid small business growth.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.